Vodafone seeks more time to respond to conciliation proposal

British telecom giant Vodafone has written to the tax department saying it needs some more time to reply to the latter’s proposal for entering into a non-binding conciliation to resolve the long-standing tax dispute.

“Vodafone has replied. They asked for more time to reply to CBDT’s letter as they want conciliation under UNCITRAL,” sources said, adding that the UK-based company is likely to decide on the proposal in its next board meeting.

Vodafone is facing tax liability of over Rs 11,200 crore on its 2007 acquisition of Hutchison Whampoa’s stake in Hutchison Essar. The demand included Rs 3,300 crore of interest over delayed payment.

The Union Cabinet earlier this month had approved a proposal for non-binding conciliation with the telecom firm, following which the Central Board of Direct Taxes (CBDT) formally wrote to the firm.

The conciliation would be under the Indian Arbitration Law and not under the United Nations Commission on International Trade Law (UNCITRAL) as sought by Vodafone.

Sources said if Vodafone enters into conciliation under Indian Arbitration Act then it would not be possible for them to seek arbitration under the UNCITRAL.

The Supreme Court last year had ruled in Vodafone’s favour, saying the British company was not liable to pay any tax over its 2007 acquisition of mobile phone assets in India.

But the government later in the year changed the rules to enable it to make retroactive tax claims on already-concluded deals, drawing criticism from global business groups.

Following that, the Income Tax Department had issued a letter in January to Vodafone International Holdings BV stating that the company is required to pay tax demand of about Rs 11,217 crore along with interest.

However, Vodafone replied saying that they do not owe anything to the Indian Government. Vodafone earlier wanted to take India to international arbitration but later offered conciliation on the issue.

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